cphite wrote:That last part always seems to get left out of discussions about the housing crash... people act like the banks did all of this on their own and - of course - use that as a reason to call for government to step in and control them... the reality is, a lot of their bad lending behavior was practically mandated by the government. There were plenty of people in the industry that were predicting the crash before it happened. But nobody wanted to listen.

Yablo wrote:I was a loan auditor for a credit union prior to the crash, and I remember being shocked and a little terrified that people with terrible credit were not only getting mortgages to buy property they couldn't afford, but then getting second mortgages at much higher rates which would raise the total amount borrowed against the property to as high as 125% of the assessed value. Our VP of Lending agreed that it was the worst lending policy he'd ever seen, but he said the credit union's hands were tied in the matter. The federal government was not only encouraging the practice, it was all but requiring it.

That last part always seems to get left out of discussions about the housing crash... people act like the banks did all of this on their own and - of course - use that as a reason to call for government to step in and control them... the reality is, a lot of their bad lending behavior was practically mandated by the government. There were plenty of people in the industry that were predicting the crash before it happened. But nobody wanted to listen.

Yeah. Unfortunately, the nature of a bubble is that when people realize it's a problem, it busts. So, by it's very nature, people are mostly thinking things are okay on the way up, and all reassuring each other, and making poor decisions. The government was not a farsighted agency, staving off the bubble in advance. Far, far from it. It was using the same bad decision making, and in making policies based on that, made the trouble worse.

Nobody's really figured out how to never have bubbles. There'd have probably been some bubble even without any government intervention at all. But they certainly didn't prevent any degree of it, and definitely worsened it to some degree. (reactions AFTER the bust are a rather separate category....though one could argue that some of those reactions were also unfair)

Thesh wrote:I would suggest that capitalism itself is not known to work, and without all the government intervention in our markets, our entire society would have collapsed long ago. The incentives that capitalism is based on leads towards greater centralization of wealth, less equal opportunity, and a more authoritarian state over time. Without the imperialism of Western nations, it's not even clear that we would be as well-off as we are. I'd suggest that the direction we are heading will probably lead us to a collapse.

Plus, co-ops have been shown to have higher productivity than for-profit companies, and growth itself seems unrelated to the relative wealth of the wealthy, with an inverse correlation with high levels of inequality. It seems to me that if you look at the individual pieces of evidence (rather than "we're successful, therefore capitalism"), pretty much everything that makes capitalism unique to other decentralized economic systems (i.e. things that benefit absentee owners) results in primarily negative outcomes to our economy and society as a whole.

It is certainly true that capitalism facilitates wealth creation when you already have the said wealth to put into investments.

But that very principle also leads people who control wealth to invest in individuals and ideas that promise to deliver them exponential wealth growth. Ergo, venture capital, PE, and the entire investment community.

Theoretically, it should be a marketplace where anyone with a great idea can get access to wealth (i.e. investor money) and use it to grow wealth for himself as well as his investors.

The problems emerge when human biases enter the picture. So instead of anyone, investors tend to favor, say, a Harvard grad. And getting into Harvard itself requires not just merit, but a modicum of stability and good schooling that the less privileged don't always have access to.

This is the true flaw in the system - the inherent bias of human beings

ryanbryandyin wrote:This is the true flaw in the system - the inherent bias of human beings

That's just a different way of saying the same thing: Any system that doesn't take into account the deep flaws of human beings is itself deeply flawed.

I mean, theoretically the best possible system is a wise and benevolent dictatorship. It doesn't preclude the dictator seeking counsel and delegating after all, and any other system necessarily introduces delays, inefficiencies and self-serving bureaucracies. The best known example of a benevolent dictatorship would be the Christian 'heaven', right..? And it's why Putin, Trump and other 'strong men' are so appealing to many.

The problem is of course that wise and benevolent dictatorships rarely remain that way, and those who most seek power are often the ones least suitable to wield it... Hence limits on power whether through diffusion or other means works best whether in politics or in the marketplace. Which is why monopolies are not a good thing even if they have arisen totally organically because the companies in question are head and shoulders above the opposition...

If anyone is still coming by this thread, I recommend "The Money Masters" by Bill Still (available on YouTube). It is a long listen, and the video isn't that great, but it is the best explanation by far of how we have come to pay for the privilege of borrowing our own currency.

Janx wrote:I recommend "The Money Masters" by Bill Still (available on YouTube). It is a long listen

Could you summarize? It would help to determine whether it's worth the time.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Heartfelt thanks from addams and from me - you really made a difference.

ryanbryandyin wrote:Theoretically, it should be a marketplace where anyone with a great idea can get access to wealth (i.e. investor money) and use it to grow wealth for himself as well as his investors.

The problems emerge when human biases enter the picture. So instead of anyone, investors tend to favor, say, a Harvard grad. And getting into Harvard itself requires not just merit, but a modicum of stability and good schooling that the less privileged don't always have access to.

If I was going to explain the point of capitalism, I would say "putting resources where they will make the most new resources, and presuming the market is smarter than any specific people".

As contrast, we can then say it's not other things:

It's not socialism, because it doesn't always do the fairest thing, when an unfair thing can make the average better.

It's not mercantilism, because it's about creating wealth, not just accruing it. This is (in practice) the hardest distinction to make, since most competition is a blend of rent-seeking and added production.

It's not feudalism (the king owning everything, who leases to the nobles, who lease to the gentry, who lease to the commoners). Because even if profit is a motive, so is power. Also, there's no method to move control of the capital from those who have it to those who can make better use of it.

ucim wrote:Could you summarize?

Assuming the book with the same name is related, it's web-page http://www.themoneymasters.com/ indicates it's a summary of monetary policy and an explanation of the financial crisis with strong sympathy for the Austrian school of economics and has a conspiracy-theory narrative. (which to be fair, there definitely small groups of relatively unknown people making decisions that have enormous impact)

The thing about recursion problems is that they tend to contain other recursion problems.

Janx wrote:I recommend "The Money Masters" by Bill Still (available on YouTube). It is a long listen

Could you summarize? It would help to determine whether it's worth the time.

Jose

Quizatzhaderac got it bang on. It's definitely worth the time to listen, but not necessarily to watch. In other words, listen while you're doing your busywork.

A fantasy adventure game straight out of 1985 evoked into the modern world. A philosophical portrait of meaning. A challenging puzzle. Whether you remember Oubliette or not, prepare to enter...The Caves of Janxrathra.

If I was going to explain the point of capitalism, I would say "putting resources where they will make the most new resources, and presuming the market is smarter than any specific people".

I think this some elides the private ownership of capital - surely a key aspect of capitalism, even the key aspect? That the function of controlling capital investment can be fully mixed with the private household finances of important individuals, without the limitations or expectations of a formal appointment. They can use it as they want, including for purely personal consumption, and they can pass that level of control on to their children.

Just as a key aspect of feudalism is that a lord's personal household is mixed with functions that we would consider part of a "government".

Well, yes I would say private ownership is a key aspect. I intended that to be implied by "presuming the market is smarter than any specific people", but alas, I gave too much duty to too few words. A capitalistic market requires competition, which requires diverse agents being able to use their own judgement.

As I see it, inheritance is something we have, while at the same time having capitalism. I can't think of any (implemented) economic system that doesn't have formal or informal inheritance. AFAIK in communist countries the median person is more likely to end up with the right to live in their late parent's home than in the US.

Inheritance (at an extreme) breaks capitalism because it limits the agents that can apply capital (such extremes are not currently a problem in most of the modern world). The freedom to spend your earnings as you wish is good (ceteris paribus), and tends to be similar to allowing agents to invest to the best of their ability, but I see this freedom as a means of capitalism, not an end. People's justification to control capital ends when their interest is other than making it grow, or it's not a reward for creating wealth (other justifications remain, but I wouldn't call them capitalism derived).

The thing about recursion problems is that they tend to contain other recursion problems.

Quizatzhaderac wrote:Inheritance (at an extreme) breaks capitalism because it limits the agents that can apply capital

Huh? By that logic, capitalism breaks capitalism, because the only agents that can apply capital are the ones that have it. But that's how it works.

Quizatzhaderac wrote:People's justification to control capital ends when their interest is other than making it grow...

It turns out that one of the effects of capitalism is that capital tends to grow under that system. This effect is strong enough to make capitalism a good contender in the "-ism" field. You could say that it helps to justify capitalism, but that's not to say that it justifies a(n individual) person's control over capital. That person's justification simply comes from their ownership of capital (subject to whatever controls there are in the system - taxes, laws, whatever). It is not however the case that a person is not justified in controlling capital if they don't (actively) make it grow.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Heartfelt thanks from addams and from me - you really made a difference.

ucim wrote:Huh? By that logic, capitalism breaks capitalism, because the only agents that can apply capital are the ones that have it. But that's how it works.

The set of people who have capital (in, for example america) contains multiple groups with explicitly competing or contradictory interests, so this restriction (capital in the hands of existing capitalists) has limited affect on growth. Taken to extreme, we get monopolies which do severely limit growth. Taking inheritance to extremes (multiple generations in the absence of another major transformation of the economy) we end up with very small or very homogeneous groups that are not subject to market conditions.

You could say that it helps to justify capitalism, but that's not to say that it justifies a(n individual) person's control over capital. ... It is not however the case that a person is not justified in controlling capital if they don't (actively) make it grow.

I said it was a justification, and I explicitly said there could be others. If they don't make the capital grow, they lack one justification. Other justifications exist, but I wouldn't say those are specifically capitalist.

The thing about recursion problems is that they tend to contain other recursion problems.

Quizatzhaderac wrote:...Taken to extreme, we get monopolies which do severely limit growth...

This only means that capitalism needs to be regulated to some extent; that rampant laissez-faire unrestrained "sic-em" capitalism is a virulent disease within what is otherwise the most powerful engine of growth yet found. But maybe that's also what you're saying, coming from a different perspective.

Quizatzhaderac wrote:I said it was a justification

Yes, but there's a difference between justifying an -ism, and justifying an individual's right to participate in that -ism. That was the point I was making.

Jose

Order of the Sillies, Honoris Causam - bestowed by charlie_grumbles on NP 859 * OTTscar winner: Wordsmith - bestowed by yappobiscuts and the OTT on NP 1832 * Ecclesiastical Calendar of the Order of the Holy Contradiction * Heartfelt thanks from addams and from me - you really made a difference.

ucim wrote: But maybe that's also what you're saying, coming from a different perspective.

More or less. I would say that the only usual language I'm using is that I wouldn't call things "capitalism" that have superficial hallmarks of capitalism (freedom to use property, freedom to accrue wealth) when taken to such extremes that they defeat the point of capitalism.

Yes, but there's a difference between justifying an -ism, and justifying an individual's right to participate in that -ism. That was the point I was making.

Yes, fair enough.

The thing about recursion problems is that they tend to contain other recursion problems.